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The de-Industrialization of America
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On January 6, 2004, Paul Craig Roberts and US Senator Charles Schumer published a jointly written article on the op-ed page of the New York Times titled “Second Thoughts on Free Trade.” The article pointed out that the US had entered a new economic era in which American workers face “direct global competition at almost every job level–from the machinist to the software engineer to the Wall Street analyst. Any worker whose job does not require daily face-to-face interaction is now in jeopardy of being replaced by a lower-paid equally skilled worker thousands of miles away. American jobs are being lost not to competition from foreign companies, but to multinational corporations that are cutting costs by shifting operations to low-wage countries.” Roberts and Schumer challenged the correctness of economists’ views that jobs off-shoring was merely the operation of mutually beneficial free trade, about which no concerns were warranted.

The challenge to what was regarded as “free trade globalism” from the unusual combination of a Reagan Assistant Treasury Secretary and a liberal Democrat New York Senator caused a sensation. The liberal think-tank in Washington, the Brookings Institution, organized a Washington conference for Roberts and Schumer to explain, or perhaps it was to defend, their heretical position. The conference was televised live by C-Span, which rebroadcast the conference on a number of occasions.

Roberts and Schumer dominated the conference, and when it dawned on the audience of Washington policymakers and economists that something might actually be wrong with the off-shoring policy, in response to a question about the consequences for the US of jobs off-shoring, Roberts said: “In 20 years the US will be a Third World country.”

It looks like Roberts was optimistic that the US economy would last another 20 years. It has only been 10 years and the US already looks more and more like a Third World country. America’s great cities, such as Detroit, Cleveland, St. Louis have lost between one-fifth and one-quarter of their populations. Real median family income has been declining for years, an indication that the ladders of upward mobility that made America the “opportunity society” have been dismantled. Last April, the National Employment Law Project reported that real median household income fell 10% between 2007 and 2012.

Republicans have a tendency to blame the victims. Before one asks, “what’s the problem? America is the richest country on earth; even the American poor have TV sets, and they can buy a used car for $2,000,” consider the recently released report from the Federal Reserve that two-thirds of American households are unable to raise $400 cash without selling possessions or borrowing from family and friends.

ORDER IT NOW

Although you would never know it from the reports from the US financial press, the poor job prospects that Americans face now rival those of India 30 years ago. American university graduates are employed, if they are employed, not as software engineers and managers but as waitresses and bartenders. They do not make enough to have an independent existence and live at home with their parents. Half of those with student loans cannot service them. Eighteen percent are either in collection or behind in their payments. Another 34% have student loans in deferment or forbearance. Clearly, education was not the answer.

Jobs off-shoring, by lowering labor costs and increasing corporate profits, has enriched corporate executives and large shareholders, but the loss of millions of well-paying jobs has made millions of Americans downwardly mobile. In addition, jobs off-shoring has destroyed the growth in consumer demand on which the US economy depends with the result that the economy cannot create enough jobs to keep up with the growth of the labor force.

Between October 2008 and July 2014 the working age population grew by 13.4 million persons, but the US labor force grew by only 1.1 million. In other words, the unemployment rate among the increase in the working age population during the past six years is 91.8%.

Since the year 2000, the lack of jobs has caused the labor force participation rate to fall, and since quantitative easing began in 2008, the decline in the labor force participation rate has accelerated.

Clearly there is no economic recovery when participation in the labor force collapses.

Right-wing ideologues will say that the labor force participation rate is down because abundant welfare makes it possible for people not to work. This is nonsensical. During this period food stamps have twice been reduced, unemployed benefits were cut back as were a variety of social services. Being on welfare in America today is an extreme hardship. Moreover, there are no jobs going begging.

The graph shows the collapse in the labor force participation rate. The few small peaks above the 65% participation rate line show the few periods when the economy produced enough jobs to keep up with the working age population. The massive peaks below the line indicate the periods in which the dearth of jobs resulted in Americans giving up looking for non-existent jobs and thus ceased being counted in the labor force. The 6.2% US unemployment rate is misleading as it excludes discouraged workers who have given up and left the labor force because there are no jobs to be found.

Labor force part rate since Jan 2000.002

John Williams of Shadowstats.com calculates the true US unemployment rate to be 23.2%, a number consistent with the collapse of the US labor force participation rate.

In the ten years since Roberts and Schumer sounded the alarm, the US has become a country in which the norm for new jobs has become lowly paid part-time employment in domestic non-tradable services. Two-thirds of the population is living on the edge unable to raise $400 cash. The savings of the population are being drawn down to support life. Corporations are borrowing money not to invest for the future but to buy back their own stocks, thus pushing up share prices, CEO bonuses, and corporate debt. The growth in the income and wealth of the one percent comes from looting, not from productive economic activity.

This is the profile of a Third World country.

(Republished from PaulCraigRoberts.org by permission of author or representative)
 
• Category: Economics • Tags: Free Trade, Unemployment 
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  1. Eric says:

    Great article, thanks.

  2. rod1963 says:

    Neither party cares nor do the upper classes who are doing just fine. Just look at all the new money – Silicon Valley billionaires and sub-billionaires all support open borders and 3rd world immigration. They are also the first to off-shore American work and import foreign workers.

    These people aren’t Americans, they just happen to live here. This could also be said probably about all of our executive and Ivy league educated managerial class. They have no allegiance to the country. It’s just a place for them to party and make money.

    With that sort of mentality at the helm of business it is no wonder the country is dying.

    As long as money is the end all be all, this country will never recover.

    • Replies: @FredAG
    , @Jim
    , @Delmar Jackson
  3. Dave37 says:

    Tariffs to make US production able to compete with overseas production. Could they do it, sure, but would they do it, never, they would rather allow a 3rd world US no matter what they say.

  4. Obbop says: • Website

    What will be the spark igniting the much-needed Revolutionary War Two?

    The USA has been in the throes of class warfare since its inception. It is time for a change and the political system is too corrupt for any meaningful change to occur from voting.

  5. Don Nash says: • Website

    Fast forward 10 years. 10 years isn’t much. 10 years will speed by with a quickness. The US of A is a gutted and dysfunctional wreck. Petty regional squabbles have broken the Union and the Union has been bankrupt for years. The world’s newest Empire pretenders circle that American corpse waiting for the crackers to run out of ammunition. What little ammunition is left after having much of that ammunition being spent on gunfire among the warring factions of red, blue, left, without a clue, and the feminazis. Oh yes and I almost forgot the border guarding militia ‘patriots’.
    A European pundit pens an American obituary which reads in part, “the American were so arrogant and they really thought they could rule the world. Seems almost a pity.”

    • Replies: @Ace
  6. Enderby says:

    PCR has consistently been against free trade AND mass immigration… but Chuck Schumer? He is completely fanatical about open borders, amnesty, and ever increasing wage destroying massive 3rd world immigration. I have a hard time believing Sen. Schumer gives a rats @ss about the job prospects of Americans, or the future of the American nation at all.

    • Replies: @SteveM
  7. Anonymous • Disclaimer says:

    I was wondering what we can constructively do about this problem. Some of the problem may not have anything to do with international trade.

    Do we repeal laws that make it hard to form unions so that the bottom 99% can get more of a share of the pie?

    What else could we do?

    • Replies: @Anonymous
  8. FredAG says:
    @rod1963

    Exactly.

    Two key ingredients are missing from today’s society (-and of course I am talking in broad generalities). (1) A sense of patriotism. A belief that one is an American surrounded by fellow Americans. (2) Christianity. It is very hard to treat your workers poorly if you truly believe that one day you will be called to account for your actions.

    The riots in Ferguson MO are a symptom of a more general malaise. A highly stratified society (small amount of very rich, large amount of very poor) is an unstable society.

    • Replies: @Ace
  9. Jim says:

    There is some intellectual dishonesty here in mentioning places like Detroit, Cleveland and St. Louis. I’m not defending our trade policies but clearly the most important cause of the decline of these cities is the demographic change from a predominanatly white to a predominanatly black population. The white suburbs around Detroit are doing far better then Detroit even though they exist in the same global economy.

  10. Anonymous • Disclaimer says:
    @Anonymous

    1. Since our most strategic asset is the American consumer you apply a VAT to all imports based on where the value is added (Ralph Gomory).

    2. You eliminate small business taxes. Only negotiate lower corporate taxes for new jobs.

    3. All U.S. Defense hardware must be American Made (including all computers, avionics, etc.)

    4. Fix the roof. Invest in maintaining American infrastructure.

    5. All Boards of Directors are required to have Labor representation.

  11. Jim says:
    @rod1963

    Any sense of common identity in the US is rapidily going away and it will never return on a national level. If the US is not to disintegrate into separate countries in the future it will require an authiritarian government.

    Democracies tend to exacerbate internal conflict. That is why they are rare in history and generally work well only in relatively small and homogenous countries.

  12. The white suburbs in Detroit are full of people working government jobs and quasi-government jobs in healthcare and education and assorted nonprofits.

    • Replies: @Jim
    , @Enrique Cardova
  13. SteveM says:
    @Enderby

    About Schumer and immigration, that oily hack is fronting for his cronied-up Wall Street constituents. The Banksters in financial services run huge IT operations and want cheap indentured servant H-1B’s to staff them.

    http://www.politico.com/news/stories/0909/27643.html

    http://thehill.com/homenews/senate/301209-unions-rip-schumers-deal-on-visas

    The dots are so easy to connect, yet the stooge MSM in bed with the Crony Power Elites refuses to connect them.

  14. @rod1963

    I don’t agree that money is the problem, but open border globalist elites are the problem. I agree totally with your first comments, but not your last point.
    If you look at the last great wave of immigration between the 1880s and the 1920s, it benefitted the business class to have enormous immigration. However, it brought severe social and economic problems the business class ignored. When the immigrant anarchists in the 1920s began blowing up buildings on wall street and killing dozens and injuring hundreds, which is a story never mentioned anymore,it made the elites, who saw themselves as Americans, not globalists, to begin promoting legislation to reduce immigration. Immigration was reduced and it allowed those here time to assimilate. The massive wave of Immigration worked because the immigrants stopped coming, a point always overlooked.
    The current business elites see themselves just as you portrayed them, they are AINOS, or Americans in name only, cosmopolitan, open border globalists, usually hyphenated Americans with no allegiance to our people. To them , America is not a people or a place, but an idea or proposition.

    Money is not the problem. the problem is we have at the very top people who are willing to import a new people for cheaper wages and to make it easier to lie to and dupe as the new people have no connection to the historical American people or nation.
    The rich of the past were able to act on the behalf of their nation and people. the new elite, have no allegiance and have no qualms about turning America into a 3rd world shi*hole as long as they profit.
    There is a fly in the ointment. Even though the globalists have bought both parties and the media, many people now want to ” eat the rich.” The funny thing is that the new immigrants the rich are importing will be bringing recipes with them . I think it is too late to save our country or people, but I also think the globalists have not awakened to the danger a connected world represents to themselves, and once they destroy America, they will have lost anyplace for themselves to run to.

    • Replies: @Jim
    , @Ace
  15. rod1963 says:

    Delmar,

    I should have been more specific. The problem isn’t money per-se but it seems to be the only important thing for the executive class in terms of making decisions. That is the problem along with them thinking they are above belonging or having to care about their country.

    What makes it so bad for us, is that they are the ones who make policy decisions.

    Take the Koch brothers – they were born into wealth, unlike their old man who built up his empire from the ground up, was a staunch American and anti-communist. How do his sons repay America? Support open borders and bribe politicians to do so. They’re as you say AINO along with most of the Silicon Valley and Wall Street tycoons.

    And you’re right, they are making it easy for people to hate them. Fact is thanks to them U.S. jobs pay an average 23% less today than they did before the 2008 recession, according to a new report released on Monday by the United States Conference of Mayors.

    This explains why people aren’t buying much and in fact falling behind and why college grads are living with their parents.

    This won’t end well. When the next Wall Street bubble bursts it’s going to be followed by a blood bath – literally. The last one in 2008 almost did, this one will. The Feds and Wall Street won’t be able to cover up their self-serving and ultimately self-destructive economic policies.

  16. Pat says:

    America isn’t and hasn’t been in a long time a country in the normal sense of the word.
    One gets a truer picture of what America is if instead of a country think of America ( the 50 states) as an empire held together primarily by two somewhat contradictory principles. Christianity and the power of money. It doesn’t take much to see that Christianity is on the wane, that leaves money as the glue that holds the whole thing together. Money or the moral force of money is the one principle left that all can agree on. To remain a country we need an animating force to unite us. War anyone?

  17. conatus says:

    The unemployment rate would be lower if we did not have to find jobs for one million LEGAL immigrants every year. Sure a lot are kids but still that puts a lot of constant pressure on the economy.

    On another issue why do we pay so much in taxes to support a military to police the entire world and a military that fights useless wars that have nothing to do with our defense?
    The US middle class is taxed to police the world to maintain safe sea lanes and safe conflict free spheres of influence so that very same middle class can be outcompeted for employment.
    My favorite link:
    http://en.wikipedia.org/wiki/List_of_countries_by_military_expenditures

    We spend 36.6% of the world’s total military expenditures. It used to be 40%. Russia spends 5%, China 10%, India 2.7%, and all the Europeans are bunched around 2-4%.
    Who pays that 36%? Our middle class is taxed so that they may lose their jobs.

    Our economy is roughly 23% of the total world GDP.
    So what’s with this disproportionate military spending compared to total GDP(36.6% to 23%). At least bring it down to our GDP.
    Let India and China pay to maintain their own sea lanes. Their working classes have been the beneficiaries of our leaders robbing our middle classes of employment. Do our egotistic leaders dare give away some military power?

  18. Art M says:

    One of the bones I have to pick with PCR on this subject is his, uh, lack of concreteness. Not that concrete isn’t, at least at one point in it’s existence, a fluid; however, on this subject PCR has seemed to waver. The title of this piece suggests that PCR is upset that industries have left Amerika, yet the piece is nothing if it isn’t bemoaning the loss of “jobs”. “But wait you fool,” you shout at me, “Industries ARE jobs!”

    Are they? Are jobs created by an industry, or is an industry developed out of jobs? Are the two mutually exclusive? Forever? But the big one: where is it written that the totality of the existence of the human race is the making and consuming of things?

    I ran across an article yesterday about a hotel that uses robots as butlers. If you are a guest at this hotel and, say, you suddenly need two fresh towels, so you phone your request to the desk. The desk then programs a robot to take 2 towels to your door. Which it does. And just as fast as you or I could do it. The hotel’s owner was asked if he was worried or concerned that he might be putting people out of work? He replied that they have not fired anyone or had to lay anyone off because of these butlers. In fact, he felt that these robots had actually enhanced the service of his human employees because the robots allowed them to be freed from mundane work, and allowed the humans to concentrate on the more important and, perhaps, interesting parts of their job. Then the owner said the killer, “These robots have not replaced my employees, they have augmented them.”

    • Replies: @Jim
  19. Dave37 says:

    Robots have definitely replaced workers in my former manufacturing company. Very efficient until something goes wrong with them and then it’s a headache just to overcome a simple problem but overall more efficient, or at least more manageable for management, than people and that’s market forces. Course I don’t know if we really need all this market of basketball shoes and cellphones, etc. Somebody once suggested nobody buy anything in the Christmas season as an act of rebellion. I don’t know who would wail louder the manufacturers or the consumers.

  20. Sherman says:

    This article is nonsense and pseudo economics.

    Industrial jobs are being lost in the US not because of “outsourcing” but rather because of technological changes.

    What this article fails to state is that US productivity is actually very high despite the drop in workers employed in manufacturing. In other words, due to increases in technology the US is able to produce far more with fewer workers.

    American manufacturers are very efficient and simply don’t need to hire so many workers. It’s simplistic and inflammatory nonsense to blame the drop in Americans employed in manufacturing on outsourcing or greedy executives or crooked politicians.

    • Replies: @Jim
    , @peterike
  21. Jim says:
    @Art M

    But in the long run will the hotel owner replace all of his human employees as they terminate or will he gradually reduce his human staff particularly as the capabilities of his butler robots improves?

  22. Jim says:
    @Sherman

    But in any case there is a fundamental problem of increasing number of workers for whom there is no productive role in the US economy. At least in legal or legitimate occupations.

  23. Jim says:
    @Delmar Jackson

    As you state the old immigration was certainly not without drawbacks. But at least the mass of immigrants coming to the US in the late 19th and early 20th century had average IQ’s close to the native population ( and in the case of Ashkenazi Jews considerably higher). The illegal immigrants pouring into the US from south of the border today probably average less than 90 IQ. By world standards this is not so low – average world IQ is probably less than 90. But there is no reason to be believe that a population of average IQ 90 can sustain a First World economy.

  24. Jim says:
    @The Unreal Woman

    Much of black Detroit is a Third World hell-hole.

  25. peterike says:
    @Sherman

    American manufacturers are very efficient and simply don’t need to hire so many workers. It’s simplistic and inflammatory nonsense to blame the drop in Americans employed in manufacturing on outsourcing or greedy executives or crooked politicians.

    Uhh huh. Well based on stats from 2010 (so it’s worse now), there were 42,400 factories closed in America since 2001. 75% of them employed over 500 people. Since Oct. 2000, 5.5 million factory jobs were lost.

    Oh, and how many people does Apple alone employ in China? 500,000. Yup. Not a lot of robots there. The fact is that Apple could make every one of its products in America and still sell them at the same price, and still make plenty of money. Only not QUITE as much money for the execs and big investors.

    The simple fact is that jobs and manufacturing were outsourced to save money and drive up stock prices, netting trillions for execs and investors. Don’t try to BS otherwise. I was there when it happened at what once was a major US tech manufacturer. They shut it all down to make money, period.

  26. @The Unreal Woman

    The white suburbs in Detroit are full of people working government jobs and quasi-government jobs in healthcare and education and assorted nonprofits.

    UnReal Woman are you saying part of the problem is unproductive social spending being consumed by white workers? Why would this be a problem? Teachers Unions are mostly white and consume a huge amount of local budgets, but remember that those dedicated workers are ensuring that children get a decent education.

    • Replies: @Ace
  27. Ace says:
    @Don Nash

    No. They thought they could rule themselves.

    And, that would be “border-guarding patriots.” Other than that, a plausible scenario.

  28. Ace says:
    @FredAG

    “A belief that one is an American surrounded by fellow Americans.”

    You said a mouthful. I turn on the tv and see a mindset of surrender and an avoidance of every major political and social problem. Charlatans, liars, and rabble rousers are fawned over.

    More than half of my “fellow citizens” voted for the absurdity who is our putative president. It’s the rare person I run across who has any steam in their boiler about open borders. The Constitution has been suborned and the federal government turned into an unstoppable Leviathan and my “fellow citizens” are indifferent. As Rush said, none of them seems to have noticed how the Statue of Liberty has become the Statue of Immigration.

  29. Ace says:
    @Delmar Jackson

    There was a community of Russian immigrants who once inhabited the western part of Geneva, Nebraska. When they returned from the fields one day they learned of President McKinley’s assassination and upon hearing of this they commenced to celebrate. The Americans in the town heard about it and demanded that they depart hence on pain of being run out on a rail. Whereupon the Russians left.

    Your mention of the immigrant anarchists in the 1920s reminded me of this story. When I first ran across it I reflected on what risks are entailed by our wholesale importation of foreigners. Time to assimilate them — and the will to demand it — helped make such immigration a success of sorts. Not a little socialism and political radicalism came in after 1848.

    Today we’re welcoming Muslims who are unassimilable at best. They have no desire to do so and, of COURSE, we would rather drop dead than require them to abandon their quaint and harmless ideas about stoning adulterers, killing blasphemers and apostates, honor killings, jihad, and the impossibility of their living under a legal regime superior to shariah.

  30. Ace says:
    @Enrique Cardova

    “Dedicated” is questionable. They get a good salary and do work that they enjoy. Enough with the adulation of teachers. Next you’ll be telling us they’re “public servants.”

    As for “decent education,” well, if indoctrinating our children in the joys of socialism, multiculturalism, and white depravity is an education I guess you have a point.

  31. Some predict a future of abundance with sacred technology that will provide for all of humanity and there will be no work for us even to do. I say we’d be freaking the hell out in the streets if we could see the future. Elysium for some slither of humans, global ghetto for the rest.

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